The relationship between cryptocurrency and gambling is one that legislators across the world still haven’t got a hold of.
Is crypto a form or gambling, or a form of income? Does the values of cryptocurrencies such as Bitcoin make them exchangeable assets in the way of stocks and shares? Or should trading be considered a gamble and any proceeds duly taxed as such?
Cryptocurrencies have only really risen to popularity in the last six or seven years, when app technology made it easier for normal people to invest in crypto, use Bitcoin as forms of payment and even gambling with crypto.
Yet it remains a largely unregulated market – and countries around the world know they are missing out on significant sums of income by not taxing Bitcoin and other cryptos correctly.
So, what can be done about this? In India they think they’ve found a solution: identify cryptocurrency trading as gambling, and rake in the tax proceeds.
What’s Happening In India?
According to QZ, India’s authorities are considering shifting the tax regulations around cryptocurrencies in order to skim more off the top of this trading system.
India currently treats earnings from crypto as a financial services transaction, rather than income or gambling yields. Because of this, crypto is taxed at between 0% to 15%. However, were regulators to bring Bitcoin and other currencies under the goods and services tax (GST), there would be a 34.2% levy.
In effect, India would treat crypto earnings like gambling earnings.
India has 100 million cryptocurrency users, the most in the world, and the shift in tax regulation could provide the government with a fresh revenue windfall.
However, as with any new technology, there is concern imposing too high a tax on crypto earnings could deter people from the market, and in the worst case scenario crush the value of systems such as Bitcoin to a level where they are worthless.
Countries across the globe are adopting a pro-crypto approach so they become crypto hubs and get the advantage
India has immense potential to become a leader in the #crypto space but 30% taxation may affect our chances by discouraging adoption and innovation.#ReduceCryptoTax
— Sumit Gupta (CoinDCX) (@smtgpt) March 21, 2022
Could America Follow India?
Governments around the world are working on how to best regulate cryptocurrencies and America would likely be watching closely, were India to effectively impose gambling status on crypto.
The US currently treats crypto profits as financial income via capital gains tax, and occasionally personal income. However, crypto is not viewed as profits from gambling.
Yet were the country to shift its perception of crypto, then a 24% tax similar to that of gambling yields could well be imposed. This may end up being the easiest way to regulate the market from an individual perspective, but it would likely threaten the status of Bitcoin and other cryptos as a financial services tool.
As with any exchange mechanism, altering its regulations would almost certainly lead to some people profiting at the expense of others. But regulation is generally considered beneficial to all, even if the original concept of cryptos was to operate outside of government.
Right now the US is focused on the tax revenues gained by licensing gambling activity across the country. And as crypto popularity continues to grow, there’s little doubt discussions will begin as to how to more effectively tax this new financial tool.
